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The Wealth Effects of Fairness Opinions in Takeovers
Author(s) -
Liu Tingting
Publication year - 2018
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12168
Subject(s) - shareholder , proxy (statistics) , database transaction , sample (material) , business , actuarial science , accounting , affect (linguistics) , economics , microeconomics , finance , psychology , corporate governance , computer science , chemistry , communication , chromatography , machine learning , programming language
Abstract This paper explores the wealth effects associated with a bidder's decision to solicit a fairness opinion in a takeover transaction. Using a hand‐collected sample with bidders’ filing proxy statements, this paper finds that the use of fairness opinions does not negatively affect bidder shareholders’ wealth, a finding that contradicts prior studies’ findings. In addition, I find a positive wealth effect associated with bidder use of fairness opinions in the post‐Rule 2290 period. Collectively, these results are consistent with a fairness opinion being used by bidder management as a means to facilitate transactions rather than a mechanism to entrench management.